Implementation Guide - Inventory
Overview
This document contains information to help you implement Inventory within NorthScope. It also contains tips and best practices to help you maximize the benefits of the software.
Product Lifecycle
Image 1 illustrates a simplistic view of the lifecycle of Raw Material moving through a Plant to become finished production. While this represents what is “physically’ happening, it may not represent effective data collection points, especially without a data collection system.
Image 1: Lifecycle of Raw Material, Work in Process, and Finished Good Items
Item Types
NorthScope supports multiple ‘Item Types’ to help organize your item master. These Item Types behave one of two ways with respect to managing perpetual inventory balances.
Item Types that are Inventory Tracked
Inventory Tracked items are item codes that maintain a perpetual inventory balance. For example, if you manage inventory balances in a 3rd party cold storage and wish to provide visibility to the On-Hand and Available balances within NorthScope, the items would be assigned with an Item Type that maintains perpetual balances. NorthScope supports one Item Type for Inventory Tracked Items:
Sales Inventory – Use this Item Type for items you wish to maintain a perpetual inventory balance. These items may either be Lot Tracked (balances are stored by Item & Lot) or Item Tracked (balances are stored by Item only).
Item Types that are NOT Inventory Tracked
Non-Inventory Tracked items are item codes that are used on transactions but do not maintain a perpetual inventory balance. For example, if you add a FREIGHT charge to a transaction you would use a Freight item code, but it is unlikely you would be maintaining perpetual inventory balances for freight charges. NorthScope supports the following Item Types for items that can be added to transactions, but On-Hand and Available balances are not stored for them:
Freight - Items codes can be added to transactions for charging customers for freight that display the summarized values of all Freight items in a “Freight” box on a printed invoice rather than showing as a detail line item. This is not currently supported but is being added.
Charges – Can be used for Miscellaneous items that you may sell or for Item Codes that you do not maintain a perpetual balance for.
Services - Item codes to distinguish revenue from services.
Tax – Items codes can be added to transactions for charging customers for sales tax that display the summarized values of all Tax items in a “Tax” box on a printed invoice rather than showing as a detail line item.
Item Categories
While NorthScope can keep perpetual inventory balances for all product categories you define as Inventory Tracked, it is often best to start with only the mandatory categories and add more as you become familiar with software. Without an integrated data collection system, all inventory transactions must be manually entered, so you need to determine if you have the processes and people in place to keep your inventory balanced with manual data entry. There are six Item Categories typically used in Food Companies that include, but are not limited to:
Finished Goods
Finished Goods are items in their final sellable form and account for most of Items that are sold to customers. These Items are most often setup and managed as Sales Inventory (Inventory Tracked) items.
Packaging & Ingredients
Packaging items represent things used to package and label your products. These include, but are not limited to things like boxes, buckets, lids, liners, labels, trays, totes, etc.
For this discussion, Ingredients are things you add to products during production. These are typically purchased from outside vendors and may include things like water, sugar, salt, spices, etc.
Listed below are a few things to consider when deciding whether to set these items up in NorthScope, and if so, determining if they will be setup as Inventory tracked or non-inventory tracked.
Do you need to analyze purchases for specific items and/or maintain Vendor specific pricing for these items? If so, having unique item codes will make this possible whereas having a miscellaneous item code will not.
Do you need to maintain a perpetual balance of any of these items? If so, having unique item codes, and setting them up as “Sales Inventory” Item Types will be required. If not, you still may want unique items codes but set them up as “Misc. Charges” Item Types.
If you need to maintain a perpetual inventory balance, are you able to correctly relieve the correct item codes from inventory and do so in a timely manner?
Is it obvious how you would set these items up? You may purchase salt from different vendors and each vendor may have a different size pack.
If an ingredient is of high value and only small amounts are consumed for a production batch, are you able to correctly record this? For example, ingredient ABC is $250 for a 10# bag. For most production orders, 5 ounces are consumed at a time. If this item is priced by the Bag and consumed by the ounce, then 1 bag would equal 10 lbs. or 16 oz. If this item were setup to manage both Units & Weight and you consumed 5 oz, you would have 10 bags with a total of 9 lbs., 11 oz.
Ingredients that go into food and packaging that directly touches food becomes part of the trackability requirements. A decision needs to be made as to where this information is going to be stored (a production system, NorthScope, paper files, etc.).
Work in Process (WIP)
Work in Process items are “intermediate” product that have had some form of interaction but may not be in a final sellable form, such as:
1,000# Totes of 20/40 Halibut
1,000# Totes of Sockeye Fillets
1,000# Totes of Grade A Red Potatoes
25# Cases of 1/8” Freeze-Dried Basil
While these types of codes are physically managed in nearly all food companies, not all companies manage them within their ERP system. These are discussed separately from Packaging and Ingredients because they often have a much higher cost, may be in multiple physical locations, and have expiration dates that must be managed.
Image 2: Product Flow
As raw product is offloaded it is “Graded” (separated by size and/or quality) into 1 of 3 different WIP codes. Each WIP code then becomes the main input for one or more finished good item codes. Assume the truck is unloaded in 45 minutes and each of the 45 WIP Totes were immediately moved to one of 3 different production lines as it was filled. On average, one tote is filled and issued to a production line each minute. As one tote is emptied, the next one is consumed, until they are all gone. If this were recorded manually, the minimum data entry would be:
A transaction to record the initial receipt of Raw Material.
A production transaction to issue the Raw Material as Production Inputs and WIP code(s) as Production Outputs.
A production transaction to issue the WIP code(s) as Production Inputs and one or more Finished Good codes as Production Outputs. This step would need to be repeated for each Production Line.
In this example, there may not be value in recording the change of inventory from Raw Material to WIP as it is only in that state for a few minutes. However, in companies were WIP product is moved to a cooler or freezer where it may sit for some time before being issued to production, having visibility to this would make sense.
Listed below are a few things to consider when deciding whether to set these items up in NorthScope, and if so, determining if they will be setup as Inventory tracked or non-inventory tracked.
Do you need to maintain a perpetual balance of any of these items? If so, having unique item codes, and setting them up as “Sales Inventory” Item Types will be required. If not, you still may want unique items codes but set them up as “Misc. Charges” Item Types.
If you need to maintain a perpetual inventory balance, are you able to correctly relieve the correct item codes from inventory and do so in a timely manner? Frozen product often stays in storage for long periods of time whereas fresh product moves in and out much faster. Because of this, it is easier to manage frozen WIP product in companies with only manual data entry. If your company has an automated data collection system that can easily track product movement in a fast-paced environment, and this data can integrate with NorthScope, you may want to track them in NorthScope.
Without integrated data collection, every interaction including initial WIP production and consuming WIP codes as inputs to create Finished Goods must be manually entered or uploaded into NorthScope. While it may be your desire to have everything managed in the system, consideration must be given to amount of manual effort required to do this timely and accurately. In a fast-paced production environment, product may only stay in a WIP form for several minutes and by the time the information is given to a data entry person, the WIP product may have already been used to create Finished
For reasons such as this, we recommend that without integrated data collection for production you start by only tracking inventory balances for Finished Goods and slow moving WIP items. Once you are running smoothly, you can add additional tracking in future phases.
Raw Materials
For this discussion, Raw Materials represent raw ungraded product you buy from Suppliers, Growers or Fishermen (not the ingredients you buy) such as:
A truckload of strawberries
A vessel of fresh caught salmon
Until they have been separated by size and/or grade they would be considered as “Raw Materials”.
In many cases, these products are stored in 1,000 totes and typically consumed by weight, not units (i.e., we consumed 600 lbs. from the tote leaving 425lbs remaining, we did not consume 1,291 potatoes leaving behind 823). While these items still may be sold to your customers and/or other similar companies, in most cases they are used as Inputs to create one or more WIP or Finished Good items. When deciding whether to manage these in NorthScope, the following should be considered:
Do you have an integrated data collection system that can submit this data to NorthScope?
Is knowing the current balances or history of these items necessary to people in sales, accounting, or other areas of your company? If so, and there is not another source to get this, it may make sense to manage this in NorthScope.
Is the amount of data entry that would be required to accurately maintain these balances something you can keep up with? This not only includes the initial receipt of Raw Materials, but also the consumption. If so, it may make sense to manage this in NorthScope.
Supplies / Other
These represent other things you may track in inventory such as gloves, knives, aprons, cleaning supplies, etc. Listed below are a few things to consider when deciding whether to set these items up in NorthScope, and if so, determining if they will be setup as Inventory tracked or non-inventory tracked.
Do you need to analyze purchases for specific items and/or maintain Vendor specific pricing for these items? If so, having unique item codes will make this possible whereas having a miscellaneous item code will not.
Do you need to maintain a perpetual balance of any of these items? If so, having unique item codes, and setting them up as “Sales Inventory” Item Types will be required. If not, you still may want unique items codes but set them up as “Misc. Charges” Item Types.
If you need to maintain a perpetual inventory balance, are you able to correctly relieve the correct item codes from inventory and do so in a timely manner?
Is it obvious how you would set these items up? You may purchase gloves from different vendors and each vendor may have a different size pack.